1.4 Policy Structure: Declarations, Insuring Agreement, Conditions, Exclusions

The DICED Framework

Every P&C policy is built from the same parts, and the exam tests where a given provision lives. The standard ISO-style policy contains five components captured by the mnemonic DICED:

Declarations Page

The declarations (the dec page) is built from the application. It lists the named insured, the mailing address, the property/vehicle described, the policy period (effective and expiration dates run from 12:01 a.m. to 12:01 a.m. standard time), the coverage limits, the deductible, the premium, and any forms/endorsements attached. If a fact (a VIN, an address, a limit) is wrong, it is corrected on the dec page.

Insuring Agreement

The insuring agreement is the heart of the contract — the insurer's promise to pay or defend. Two broad coverage triggers appear:

• Named-peril (specified-peril) form — covers only the perils explicitly listed (e.g., the Dwelling DP-1 basic form). The burden of proof is on the insured to show the loss came from a listed peril.
• Open-peril (all-risk / special) form — covers all direct physical loss except what is excluded (e.g., HO-3 on the dwelling, ISO CP special-cause-of-loss CP 10 30). The burden of proof shifts to the insurer to prove an exclusion applies.

Conditions

Conditions are the mutual duties. Common P&C conditions include: prompt notice of loss, filing a sworn proof of loss (often within 60 days), protecting property from further damage, cooperating in the investigation, the appraisal clause (to resolve disputes over the amount of loss), the loss-settlement (ACV vs. RCV) terms, subrogation, cancellation/nonrenewal, and assignment. Failing a condition can bar an otherwise valid claim.

Exclusions and Limitations

Exclusions narrow coverage. They exist to remove uninsurable catastrophes (flood, war, nuclear), non-fortuitous losses (wear and tear, intentional acts), losses better covered elsewhere (auto under a homeowners policy), and to control moral hazard. Sublimits cap certain property (e.g., $200 on money, $1,500 on jewelry theft in a homeowners form).

Coinsurance — the Most-Tested Calculation

Commercial property and some dwelling forms require a coinsurance percentage (commonly 80%, 90%, or 100% of replacement cost). If the insured carries less than required, the claim is penalized by the formula:

Payment = (Carried / Required) x Loss - Deductible (never more than the limit).

Worked coinsurance example: A building's replacement cost is $500,000 with an 80% coinsurance clause, so the required amount is $400,000. The insured carries only $300,000 and suffers a $100,000 loss with a $1,000 deductible.

• Carried / Required = 300,000 / 400,000 = 0.75
• 0.75 x $100,000 = $75,000
• Minus $1,000 deductible = $74,000 paid; the insured absorbs the rest as a penalty for underinsurance.

Split Limits vs. CSL (Liability)

Liability limits appear two ways:

• Split limits — e.g., 100/300/50 means $100,000 per person bodily injury, $300,000 per accident bodily injury, $50,000 property damage.
• Combined Single Limit (CSL) — one limit (e.g., $300,000) for all bodily injury and property damage combined per accident, giving more flexibility.

Worked split-limit example: Under 100/300/50, an at-fault driver injures three people claiming $120,000, $90,000, and $80,000 (total $290,000). The first claimant is capped at the $100,000 per-person limit; the other two are paid in full ($90,000 + $80,000). Total BI paid = $100,000 + $90,000 + $80,000 = $270,000, within the $300,000 per-accident cap.

Order of Precedence

When provisions conflict, the more specific controls the general: endorsements > declarations > policy form, and handwritten/typed entries override pre-printed text.

Exam trap: On an open-peril form the insurer must prove an exclusion; on a named-peril form the insured must prove the peril is listed. Reversing this costs easy points.

Reading a Declarations Page on the Exam

Expect a fact-pattern that hands you a dec page and asks a downstream question. Confirm the named insured (only listed persons and resident spouses/relatives get full insured status), the policy period (12:01 a.m. standard time at the described location), the limits and deductible, and the forms list. If the question turns on a coverage that is not shown as an attached endorsement, the answer is usually that the coverage does not apply.

Endorsements Modify, Definitions Control

Endorsements (riders) add, delete, or change coverage and override the base form where they conflict. Definitions are the controlled vocabulary of the policy; words in quotation marks or bold ("occurrence," "insured," "auto") mean exactly what the definitions section says, not their everyday meaning. Many wrong answers rely on the everyday meaning of a defined word.

Sublimits and Special Limits Worth Memorizing

Within a homeowners Coverage C, special limits cap certain property regardless of the overall limit, for example roughly $200 on money/coins, $1,500 on jewelry/watches/furs for theft, and $2,500 on business property on premises. The exam tests whether you apply the sublimit, not the full Coverage C limit, to that category of property.

Exam summary: Use DICED to locate any provision. If a question asks where a duty after loss appears, the answer is Conditions; what is not covered is Exclusions; the promise to pay is the Insuring Agreement; the facts are on the Declarations.